California Budget Crisis Ends with Both Sides Dissatisfied

By Lou Cannon
The Washington Post

SACRAMENTO, Calif.

The fiscal crisis that brought California state government to its knees
finally ended yesterday when weary legislators surrendered to Republican
Gov. Pete Wilson and passed the stringent school-finance measure he had
demanded.

By the time a tired but smiling Wilson signed the $57.6 billion budget bill
at 1:45 a.m., California had entered its 64th day without a budget and had
issued $3.4 billion in IOU's to meet its payrolls.

Although the virtual capitulation by the Democratic-controlled Legislature
to Wilson's insistence on deep cuts in government services was a victory
for the governor, state officials warned that California could face a
repeat of the crisis next year and have fewer resources to deal with it.

State Finance Director Tom Hayes said California has lost 750,000 jobs
since August 1990 while needing to create at least 500,000 new jobs just to
keep even with population growth. Hayes said that unless there is an
unexpectedly sharp upturn in the economy the state will again face a
multi-billion-dollar shortfall in 1993 but, with programs already pared so
heavily, it will be difficult to find additional cuts.

While the budget delay caused what Wilson called "inexcusable pain and
suffering" for elderly and disabled Californians whose health and
nursing-home services were interrupted, it did not inconvenience most
Californians.

The results of the actual budget, on the other hand, will be felt by most
of the state's 31 million people. Community-college fees will double and
university fees increase significantly, causing a projected drop in
enrollment of 200,000.

Welfare grants, among the highest in the nation, will be cut 5.8 percent
and cannot be raised for four years. Local governments will lose $1.3
billion in state aid, which probably will translate into cutbacks in police
and fire protection at a time when crime rates and fire dangers are
increasing. Some county medical-trauma centers already have closed. Library
and park hours have been reduced in many communities.

While Wilson successfully resisted new tax increases, the budget contains
some $700 million in higher fees and charges that Republican Assembly
member Tom McClintock, a conservative foe of the governor, called "tax
increases by another name."

The likelihood of voter resentment over these cuts and the grim economic
conditions in California, now in its worst economic downturn since the
Depression, triggered an outpouring of frustration Tuesday night in the
Assembly, where liberal Democrats and conservative Republicans took turns
castigating Wilson.

"There is a point where you have to give the terrorist what he asks for,"
said Assembly member Delaine Eastin, a Democrat, lamenting legislative
compliance with Wilson's demand that $1 billion of the $24 billion
allocated to schools this year be treated as a loan to be repaid from
future revenues.

On the other side of the aisle, former Assembly Minority Leader Ross
Johnson, a Republican, denounced Wilson for allegedly betraying
conservative principles when he pushed an $8 billion tax increase through
the Legislature last year and for "mean" behavior in cutting services this
year.

Liberals and conservatives teamed up in an attempt to rebuke Wilson with a
bill that would have forced cuts of $92 million in the executive
bureaucracy and put the money into grants for low-income university
students, which have been sharply reduced in the new budget. The measure
passed the Assembly but died in the Senate after moderate Republican
Minority Leader Kenneth Maddy warned that it would be vetoed by Wilson and
prolong the legislative session.

The spending package signed by Wilson was similar to the one the Assembly
rejected June 30 when the crisis began. Democratic Assembly Speaker Willie
L. Brown Jr. agreed to end the holdout when it became apparent that Wilson
would not back down and Democratic legislators began complaining that they
could face defeat in new, court-apportioned districts unless they passed a
budget.

In agreeing to what Assembly member John Burton, a Democrat, called "a
mutally negotiated surrender," Brown won one concession from Wilson -- an
agreement that funds allocated to education would not be cut further even
if the economy declines.

But Brown was forced to accept a so-called "poison pill" that would suspend
a state constitutional requirement giving education the first call on
government revenues in the event a court overturns the loan provision of
the budget bill.

Unlike many of his colleagues who denounced Wilson, Brown spoke in favor of
the compromise he had accepted in private conversations with the governor.
He noted that the state had been forced to suspend the guarantee giving
education first call on state revenues after the 1989 Loma Prieta
earthquake.

"There is the same kind of potential disaster if we don't produce a
budget," Brown said.

The public approval of Wilson during the crisis has fallen to 20 percent
and to 7 percent for the Legislature. Brown has said most incumbent
legislators will survive public disapproval of the institution, but
Republican strategists say they have their best chance in three decades to
win control of the Assembly.